India's OYO plans Saudi debut, UAE expansion

Indian hospitality start-up, OYO plans to launch a new category in Saudi Arabia to tap the large inflow of religious tourists into the country
India's OYO plans Saudi debut, UAE expansion
OYO 101 Click Hotel in Deira, Dubai.
By James Mathew
Tue 01 Jan 2019 12:09 PM

OYO, the unicorn Indian hospitality start-up, will soon enter Saudi Arabia, Abu Dhabi and Al Ain, as part of its ambitious expansion plans in GCC.

The South Asian hospitality chain has also set a target of reaching 12,000 rooms by 2020 in the Middle East market, almost a 10-fold jump from its current level of 1300 rooms on its platform in the UAE market.

“Having covered four major cities in UAE since we entered the Dubai market in April last year, we will soon be expanding our operations to Saudi Arabia in a big way,” Manu Midha, Regional Head, Middle East, OYO Hotels & Homes, told Arabian Business in an exclusive interview.

Besides its traditional offering such as hotel rooms, homestays and townhouses, Midha said OYO plans to launch a new category in Saudi Arabia to tap the large inflow of religious tourists into the country.

Though Midha refused to divulge the exact launch date of OYO’s operations in Saudi Arabia, it is expected in the early months of this year.

UAE expansion

OYO currently operates in four UAE cities – Dubai, Sharjah, Fujairah and Ras Al Khaimah, notching up 1300 hotel rooms in a short span of 8 months. 

The Indian start-up major also plans to ramp up its total employee strength in its UAE opration to 200 by the end of this year, from 50 at present.

It also plans to create a total of 4,000 direct and indirect jobs in the GCC market by 2019 end.

Midha, however, declined to comment on the level of investment OYO will be making in its ambitious growth and expansion plans in GCC.  

Funding

The Ritesh Agarwal-founded Indian unicorn start-up, which has raised $1 billion funding last October, has a clutch of international and Indian investors led by SoftBank Group.

The other investors in OYO are Sequoia Capital, China Lodging Group, Greenoaks Capital, Hero Enterprise and Lightspeed India.

Midha did not comment on whether OYO will be looking at attracting any new investors from the Gulf region to fund its proposed Middle East expansion plans.

According to senior OYO executives, the latest rounding of funding by SoftBank Group is through its Vision Fund, which is backed by Saudi Arabia and the UAE.

“So, there is already in-direct investor participation from the GCC region in our company,” these executives said.

In addition to Saudi Arabia, OYO will also entering the markets of Abu Dhabi and Al Ain in the next 6-month period.

Middle East growth

In the next phase of its expansion, OYO will be targeting Oman and Bahrain in GCC and Egypt and neighbouring countries in the larger MENA region, Midha said.    

OYO already has tied up with 16 hotels in UAE, which it proposes grow to between 80 and 100 properties in the next 12-month period.

“We are in negotiations with some of the leading developers and hospitality chains in the GCC region for tie-ups,” Midha said, without disclosing the names of any of the developer or hospitality groups.

The Indian hospitality chain has also managed to cater to over a 100,000 customers from 78 countries since it commenced operations in Dubai April last year.

Under its townhouses vertical, OYO already manages 40 homes, which it plans to take to 200 in the next 6 months.

OYO Homes manages individual houses on leases under its brand, providing all its internationally benchmarked facilities and services.

OYO Hotels & Rooms manages hotels under both ‘operate and manage’ (O&M) as well as the franchisee models.

Under the O&M model, OYO manages the properties entirely on its own with a revenue sharing arrangement with the owners of the properties, whereas under the franchisee model, it extends its brand and know-how to hotel properties which have to follow certain laid down benchmarks, for a royalty.

The average size of hotels under OYO is 80-100 rooms as against the average size of 200-250 rooms of large offline hospitality majors such as Marriott, Hilton and Ritz.

“We manage to achieve the highest value proposition in all aspects – whether in terms of returns per room, inventory management and most importantly scores high on overall customer satisfaction, because of our better use of technology, combined with high quality and uniform standard of services across all our properties in all geographies,” Midha said.

OYO, after spreading its operations across India and the UAE, has also expanded to China, the UK and some countries in the Southeast Asia.  

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